Anchoring is a cognitive bias that describes the common human tendency to rely too heavily, or “anchor,” on one trait or piece of information when making decisions.
During normal decision making, individuals anchor, or overly rely, on specific information or a specific value and then adjust to that value to account for other elements of the circumstance. Usually once the anchor is set, there is a bias toward that value.
Take, for example, a person looking to buy a used car. He or she may focus excessively on the odometer reading and model year of the car, and use those criteria as a basis for evaluating the value of the car, rather than considering how well the engine or the transmission is maintained.
Anchoring and adjustment is a psychological heuristic that influences the way people intuitively assess probabilities. According to this heuristic, people start with an implicitly suggested reference point (the “anchor”) and make adjustments to it to reach their estimate. A person begins with a first approximation (anchor) and then makes adjustments to that number based on additional information.
The anchoring and adjustment heuristic was first theorized by Amos Tversky and Daniel Kahneman. In one of their first studies, the two showed that when asked to guess the percentage of African nations which are members of the United Nations, people who were first asked “Was it more or less than 10%?” guessed lower values (25% on average) than those who had been asked if it was more or less than 65% (45% on average). The pattern has held in other experiments for a wide variety of different subjects of estimation. Others have suggested that anchoring and adjustment affects other kinds of estimates, like perceptions of fair prices and good deals. Some experts say that these findings suggest that in a negotiation, participants should begin from extreme initial positions.
As a second example, an audience is first asked to write the last two digits of their social security number and consider whether they would pay this number of dollars for items whose value they did not know, such as wine, chocolate and computer equipment. They were then asked to bid for these items, with the result that the audience members with higher two-digit numbers would submit bids that were between 60 percent and 120 percent higher than those with the lower social security numbers, which had become their anchor.